Bloomberg News

Baht Drops Most in a Week After Japan Intervenes to Weaken Yen

October 31, 2011

Oct. 31 (Bloomberg) -- Thailand’s baht slumped the most in more than a week after Japan’s Finance Minister Jun Azumi said his government intervened to weaken the yen, spurring speculation regional central banks will follow suit.

The baht was still poised for its first monthly advance since July after global funds bought $963 million more Thai equities and $358 million more government debt than they sold this month through Oct. 28, according to data from the stock exchange and the Thai Bond Market Association.

“Japan’s move boosts speculation other Asian central banks will intervene to slow the pace of appreciation in their currencies,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo. “Thailand has seen quite a sizable amount of fund inflows into its stocks and bonds and that supported the baht.”

The baht declined 0.7 percent to 30.73 per dollar as of 3:14 p.m. in Bangkok, according to data compiled by Bloomberg. That was the biggest drop since Oct. 20. The currency strengthened 1.2 percent this month and touched 30.46 on Oct. 28, the strongest level since Sept. 21.

The yen slumped 4 percent to 78.97 per dollar after reaching a postwar record of 75.35 earlier. Azumi pledged to keep selling the yen in the foreign-exchange market.

The Bank of Thailand lowered its 2011 growth forecast on Oct. 28 to 2.6 percent from a previous prediction of 4.1 percent after the nation’s worst floods in five decades swamped about 10,000 factories.

“Some investors may have bought stocks in anticipation there will be a boost to growth from rebuilding efforts after the floods,” Nishihama said.

The yield on the 5.25 percent debt due May 2014 dropped 35 basis points, or 0.35 percentage point, this month to 3.18 percent, according to data compiled by Bloomberg. The rate fell two basis points today.

--Editors: Andrew Janes, Simon Harvey

To contact the reporter on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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